Health insurance and income tax deduction are very much interconnected. You can get a deduction under section 80D in case you have a health insurance policy. But it is not the only reason for health insurance.
Health is wealth. This is a very common and well-known sentence. But very few people can maintain the main purpose of this sentence in their life. Today’s world is very fast. We are participating in the race to beat each other and trying to gain a successful life.
Practically this hard-working racing life is very stressful. Overwork, competition, target achievement etc can kill your body and mind. But we overlook that side and just doing our regular stressful work. Our main goal is enjoying aery good and relaxing retirement life. However, retirement means old age and old age means health issue.
This does not necessarily mean that only in the old age the problem of health issue occurred. Now a day’s many people at the age of 40 are suffering from many health diseases. Millions of people lose their lives by heart disease and diabetes.
It is true that medical science has done a tremendous improvement in producing new and advance medicine. But it is also true that the costs of new and advanced medicines are very high. Besides that hospital/nursing home charges are also very high.
Therefore it is very much recommended for people to undertake a good healthcare plan. An early healthcare plan is very much profitable because nobody knows when an emergency situation will occur. Without investing in a good health care plan it is very difficult to get the benefit of better treatment from the good hospital or nursing home. Hence it is very important to invest in good medical insurance or health insurance policy.
What is Medical Insurance Policy?
A medical or health insurance is such type of insurance that pays for medical and surgical expenses incurred by the insured person. A health insurance policy is a contract between the insurance service provider and an individual. According to this contract, the insurance company provides support to the insured person when any health issue occurred. On the other hand. Insured person will pay a regular premium (monthly, quarterly or annually) to the insurance company.
There are two types of health insurance claim process- (a) Cashless process and (b) Reimbursement Process. Generally, insurance companies have a tie-up with leading hospitals for providing cashless treatment to the insured. If there is no such tie-up then reimbursement process will be applicable.
The benefit of Medical Insurance
Medicare or medical costs are rising year after year. For a common man, arranging the fund in a critical situation is not a matter of joke. Health insurance is the only way to survive in this critical situation. With health insurance, you are very much secure to handle health-related problems. This makes health insurance an important investment for the individual.
Besides above, there is another benefit of health insurance. Premium paid on health insurance is eligible for deduction under section 80D from your taxable income. It can reduce your tax burden.
Deduction under section 80D
Basically, when we discuss tax savings investments, we talk about life insurance, PPF, home loan, NSC, Term deposit etc i.e. deduction under section 80C. Besides above-mentioned methods, investing in a medical insurance policy is a good and proven tax saving method. You can get deduction under section 80D from your taxable income.
The eligible assessee for getting the benefit of section 80D are (a) An individual or (b) A Hindu Undivided Family
For the individual, insurance can be made on the health of the assessee, spouse, parents (whether dependent or not) and dependent children.
For HUF, insurance can be made on the health of any family member.
Following investments are eligible for the availing benefit of section 80D:
Premium paid to or contribution made by an Individual or HUF out of income chargeable to tax under:
- Medical Insurance scheme of the General Insurance Corporation of India approved by the Central Government; or
- Central Government Health Scheme; or
- Any other insurer approved by the IRDA; or
- Such other scheme as may be notified by the central government in this behalf.
- In case of an Individual, amount up to Rs. 5,000 towards Preventive Health Check up of the assessee or family of the assessee.
Amount of Deduction allowable under section 80D
The following types of deductions that one can claim under this section
- Deduction on premium paid for self, spouse and children
- Deduction on premium paid for parents
- Deduction for preventing health checkup.
- Deduction for medical expenses of the super senior citizen.
Deduction on premium paid for self, spouse and children
- The amount of deduction can be claim up to Rs, 25,000.
- If the assessee is a senior citizen, then the amount of deduction shall be Rs. 50,000
Deduction on premium paid for parents
- In addition to the above, a deduction can be claimed on premium paid on health insurance of parents also,
- If parents are less than 60 years of age, then the amount of deduction shall be Rs. 25,000.
- If the parents are senior citizen, then the amount of deduction shall be Rs. 50,000.
Deduction on Preventive Health Checkup
- In case of Individual, an additional deduction of Rs. 5,000 is allowed for payment of preventive health checkup of the assessee himself or his family including parents and dependent children.
- However, the aggregate amount of deduction shall be restricted to Rs.25, 000 or Rs. 30,000 as the case may be. Hence the deduction of Rs. 5,000 is not in addition to the amount of Rs.25,000 or Rs.30,000. It is included with the above deduction.
- It may be noted that Rs. 5000 is the maximum total allowable deduction. You cannot get any amount of deduction for preventing health checkup of self and family member. For every member, the maximum amount of deduction is Rs 5000. It is not for per person.
Deduction for medical expenses of super senior citizen (80 Years or above age)
- The maximum allowable deduction can be Rs 30000.
- The deduction can also be granted if the assessee incurred any medical expenses for the super senior citizen.
The deduction for senior citizen and super senior citizen has been increased from Rs. 30000 to Rs. 50000 from Assessment year 2019-20 onwards (As per budget 2018).
The following table summarizes the deduction allowable u/s 80D:
|DESCRIPTION||Amount paid for||Total Deduction|
|Self, spouse & dependent Children||Parents Dependent or not|
|Age less than 60 Years||Rs. 25,000||Rs. 25,000||Rs. 50,000|
|Assessee and his family less than 60 years of age and parent is a senior citizen||Rs 25,000||Rs. 50,000||Rs. 75,000|
|Assessee and parent both are the senior citizens||Rs. 50,000||Rs. 50,000||Rs. 100,000|
Mode of Payment of the premium
- In case of mediclaim premium, payment should be made by any mode other than cash
- In case of preventive health check-up, payment should be made by any mode including cash.
Example of deduction u/s 80D:
Q1. Mr. Avishek, an individual has made the following payments
- Rs 12000 paid by cheque to GIC for own health
- Rs. 6000 in cash for preventive health check-up.
- Rs. 10000 paid by cheque to GIC for the wife not dependent on him.
- Rs 8000 paid by cash for his dependent son.
- Rs 8000 paid in the credit card to GIC for dependent daughter.
- Mr. Avishek’s age is less than 60 years. Compute the amount of deduction.
Ans: According to the above-mentioned discussion maximum permissible deduction (other than the senior citizen or super senior citizen) is Rs 25000 for medical insurance. For preventing health check up the deduction is Rs. 5000. Again for mediclaim premium, payment should be made in any mode other than cash, In case of the Preventive health check-up, the payment will be made in any mode including cash. Again, preventive health checkup is not over and above the deduction amount of Rs 25000/Rs 50000 as the case may be. It is included.
Therefore the amount of deduction shall be:
For own health- Rs 12000
For Wife Rs 10000
For Preventive Health Checkup Rs 5000
For Dependent Daughter Rs 8000
Total Rs 35000
However, the maximum allowable deduction is Rs. 25000. Hence the amount of deduction u/s 80D is Rs. 25000.
- No matter wife is dependent or not.
- Cash payment of Premium on health insurance is not allowed. Therefore, Rs 8000 for dependent son is not considered for deduction.
Q.2 Mr. Avishek is Senior Citizen. He paid the medical insurance premium for himself of Rs. 35000. His father is a super senior citizen, Mr. Avishek paid Rs. 32000 as a premium for health insurance policy. Calculate the maximum permissible deduction under section 80D.
Ans: According to the question, Mr. Avishek is a senior citizen. He is eligible for the tax deduction of Rs. 50000. He paid a premium for own medical insurance of Rs. 35000. Hence he can get the deduction for Rs. 35000.
Again his father is a super senior citizen. For the super senior citizen, the maximum permissible deduction under section 80D is Rs 50000. The expenses amount is Rs 32000. Hence he can get the deduction of Rs 32000.
Therefore the total amount of deduction under section 80d is Rs 67000(Rs 35000+ Rs 32000)
Q3. Mr. Avishek, an individual, made payment of health insurance premium to GIC in an approved scheme. Premium paid on his health is Rs 15000 and his spouse is Rs. 12000 during the Previous Year 2017-18. He paid health insurance premium of Rs 20000 on his father’s health who is a senior citizen. He also paid Rs 15000 in his mother’s health who is also a senior citizen. All the payment was made in cheque. Compute the amount of deduction u/s 80D available to Mr. Avishek.
Ans. According to the question, Mr. Avishek, an individual, made payment of health insurance premium to GIC in an approved scheme. Hence he is eligible for deduction under section 80D. The premium is paid by him through cheque i.e. other than cash.
Now, he paid Rs. 15000 for himself and Rs. 12000 for his wife. So the total amount is (Rs. 15000+Rs. 12000) Rs. 27000. However, the maximum permissible amount is Rs. 25000.
Again, he paid Rs. 20000 for his father’s health insurance premium and Rs. 15000 for his mother’s health insurance premium. Both are the senior citizen. The total amount of premium is (Rs. 20000 + Rs 15000)Rs 35000. However, the amount is restricted to Rs. 50000 for the senior citizen.
Therefore, the total amount of deduction is (Rs. 25000 + Rs. 35000) Rs 60000.
Frequently asked questions:
Q1. Deduction on account of preventive health check-up u/s 80D is maximum to the extent of Rs 5000. Is this in addition to Rs. 25000 or part of Rs. 25000?
Ans: The amount of Rs 5000 for preventive health checkup is a part of Rs 25000 or Rs 30000 as applicable. It is not an over and above the value of Rs 25000/Rs 50000 as the case may be.
Q2. Can deduction on account of preventive health check-up be claimed separately for each dependent?
Ans: The answer is no. You cannot get a separate deduction of Rs 5000 for each dependent. Rs 5000 is the maximum total deductible amount on account of preventive health check-up.
Q3. Can medical insurance premium be paid in cash?
Ans: If you pay the premium in cash then no deduction can be allowed u/s 80D. The deduction can be allowed if the payment of premium is made in any mode other than cash. However, for deduction on account of preventing health check-up, the expenses can be made in any mode including cash.
Q4. My insurance premium covers my wife and dependent son. If my wife pays the premium then who will enjoy the deduction?
Ans. Of course, who pays the amount of premium will enjoy the benefit of the deduction. Hence my wife can claim the deduction.
So, friend, it is all about deduction under section 80D. If you have any other information about this topic then please inform me. I will update it in future. Thank You.